The Trade Desk’s Jeff Green: The Consumers Are Forcing Changes

The Trade Desk made headlines this week when it raked in $45 million in debt financing and brought on Microsoft, RGM Group and Delivery Agent alum Gabe Greenberg to manage its Advanced TV division.

The company positions itself as both a DSP and a DMP, and its leaders have longstanding roots in automation, according to CEO and co-founder Jeff Green.

“We’ve been in programmatic from inception,” Green said, adding the company benefits from never having repositioned its business model.

“We were never an ad network and decided to become a DSP,” Green said. “Instead, we’ve always focused on being the very best buy-side platform. We think a buyers’ platform has to have both a DSP and a DMP. And our vision is to be across all channels.”

Green spoke to AdExchanger.

ADEXCHANGER: What drove The Trade Desk’s debt financing round?

JEFF GREEN: One element that drove this financing is the need to make sure that receivables are not a problem. Sometimes the big brands and agencies take longer to pay, so having debt to make sure we don’t have any working capital problems is fantastic. The other piece of this round of debt financing is about taking some cash and putting it on our balance sheet so we have some pretty massive additional cash reserves. We raised $20 million in the beginning of the year, and we still have almost all of that capital as well.

Important to note is that we’re profitable. You could contrast our company to one like Rocket Fuel, who spends something like $18 million or $20 million a quarter. In other words, they’re burning through nearly $100 million a year, while we’re profitable. All that debt it just to create additional room for us to grow, but it’s mostly about padding our balance sheet so we can do so with even more aggressiveness than in the past.

What do you hope to achieve through Advanced TV?

2015 is a game-changing year for programmatic and television. There are finally more smart TVs than non-smart TVs in the market. You could also look to the trends as proof, like the decrease in consumption of broadcast television. Those are two anecdotal pieces of evidence point to this fact: Programmatic is a better way to monetize television.

Consumers are changing their behaviors, and they’re consuming more content digitally. This presents an opportunity for programmatic buyers and sellers to enter the scene. Because we are the DSP that’s best aligned with agencies, and because nearly all television dollars are bought and sold through agencies, we think we’re better positioned to win in the television space than any other buy-side platform.

What about the other video DSPs?

You have to be multichannel to be competitive, and a lot of companies in this space have tried to make the old way of selling television fit with programmatic, not try to make programmatic transform the old way of buying television.

What will industry players have to change to make programmatic TV a reality?

What the networks have to do is very different from what people in the middle have to do, which is also very different from what the agencies have to do. What’s different about television vs. display advertising five or six years ago is that there’s so much demand for the content, that there is generally a better balance of supply and demand. There are a lot of publishers that were reluctant in display. I don’t think the economics will warrant the same amount of hesitation in television.

The second thing that’s massively different about TV and display is that consumers are changing their behavior and demanding that they essentially have content on demand. With display, no one was demanding that they had more relevant ads, but they got them anyway. In television, they’re demanding that their content be personalized and addressable.

There’s a greater component of the consumer playing a role in television than what happened in display. Those consumer changes are forcing changes in all of the players that participate in television. In thinking about the rise of streaming, 2015 is a game-changing year.

Who are The Trade Desk’s biggest agency customers?

We work with all of the major holding companies, so WPP, GroupM, Accuen inside of Omnicom, Publicis and on and on. But we also power hundreds of other agencies and ad networks, and other types of aggregators and technical services providers. We have over 300 aggregators using our technology.

How are those large agency deals structured?

It’s fairly traditional to DSPs, where clients pay a percentage of spend. Every once in a while, there’s something that’s atypical but that’s extremely rare.

But perhaps the reason you’re asking that is because sometimes you hear noise from other people in the space saying, “Hey, we want to sell license fees because that’s what we hear a SaaS company is.” We believe we’re as much of a SaaS company as any SaaS company, publically traded or privately held.

The earmarks of being a SaaS company are that you sell MSA [master services agreements] or licenses or access to a platform, and that you have recurring and predictable revenue. We think we do that as well as anybody in ad tech. We don’t think we have to transform pricing in order to consider ourselves a SaaS company.

You mentioned pricing. Are you seeing any changes in agency compensation models with the rise of programmatic?

In general, that hasn’t changed a lot. Agencies that are most forward-thinking – and frankly I also think this about the tech companies – are companies that are constantly revaluing to say, “How can I better align my incentives with my clients and how can I be properly compensated for the risks that I take?”

Most people are still trying to catch up or keep up with what the hell’s going on, because there’s so much change happening in our space.

Have there been any major changes in how agency holding companies are trading with DSPs?

I know each of the big agency holding companies so well that it’s hard to talk about specifics without revealing something. But in very broad strokes, agencies have more pressure on them than ever to be transparent. And inside the agencies you’re seeing strategies that reflect cases where clients just want to measure their agency on performance and don’t care as much about transparency. And you’ll see other cases where clients want more and more transparency. And in those cases, you’re seeing some shift in the way that the organizations or the agencies themselves are structured. And I think they’re moving in a very positive direction, which is that more of the insight and more of the expertise is getting closer to the client.

So whether that’s because agency trading desk employees are now sitting inside of agencies, or whether that’s because trading expertise is now on the rise inside those individual agencies, you’re getting more insight and expertise closer to the client, which is a good thing.

Are you actually seeing more brands bringing programmatic trading in-house?

There’s much less of that going on than you think. Managing a full-funnel programmatic buy is more difficult than most brands think. The majority of that still sits in the hands of professional money managers, or those agencies or other aggregators that are doing it full time. The majority of it sits there today and the majority of it will stay there.

Brands really want more control, more say and more insights. And you don’t have to bring programmatic in-house to get all of that. And I think we’re still in the process of figuring out that balance, but that there’s actually a lot less of that happening than the headlines would suggest.

What role will DSPs play in 2015?

DSPs are built to buy media across all digital channels and everything will eventually become digital. That means that there will be no such thing as a mobile DSP, or a video DSP, or a brand DSP or even a Chinese DSP. And despite whatever barriers to entry there are for China, most of the global brands will demand to have a global platform. That creates a great need for a platform that focuses on the buy side, and that buys across all channels.